ROLE OF SERVICE SECTOR IN ECONOMY
The Indian economy witnessed GDP growth rate of 6.9% on top of a high 8.5% growth achieved in the preceding year. The spirit that the economy has achieved was demonstrated by the fact that this growth of 6.9% took place in the face of deficient monsoons, steeps hike globally in oil and steel prices and a change in the government in the center.
While the industrial sector registered a growth of 8.3% reflecting good spirits in manufacturing activities, service sector maintained its earlier momentum and grew by 8.6%. However the agricultural sector, growth increased by only 1.1% due to erratic monsoon. In spite of a deceleration in the overall growth rate, the continuing momentum in the growth of industry and service sectors has kept business confidence at high level.
The Indian economy has finally reaped the benefits of just over a decade of reforms. Economists now expect the Indian and Chinese economies to be the world's growth engines in the 21st Century. The economy has recorded a growth rate of 6% per annum since 1990, reducing poverty by 10% points in the process. Industry is no longer a State monopoly. Almost all sectors have been opened up to the private sector. Import licensing has been abolished. Foreign exchange reserves have climbed rapidly from USD 40 billion in March 2001 to USD 50 billion in March 2002 to 142 billion in June of 2006. As with any growing economy the sectoral composition of GDP has been changing with the services sectors showing an increased share and that of agriculture declining to 20%. The fastest growing sector in the economy has been the services sector, which now accounts 50% of GDP.
To become an economic power, technology and economy need to be considered in an integrated manner rather than as separate entities. With the opening up of economy, Indian industry needs to be globally competitive. Hence, “what is required is a clear vision of what can be achieved and how best to achieve it". The Indian Industry will have to support the nation in acquiring economic leadership and progress by 2020. The foundation of this leadership will depend to a great extent on the technological excellence of the firms.
DEFINITION AND MEANING
A service is an act or performance offered by one party to another. They are economic activities that create values and provide benefits for customers at specific time and place as a result of bringing about a desired change in or on behalf of the recipient of the service.
The term service is not limited to personal services like medical services, legal services, professional services etc. according to marketing experts and management thinkers the concept of service is a wider one. The term ‘services’ are defined in number of ways but not a single one is universally accepted.
Following are some important definitions:
According to DONALD COWELL,
“Goods are produced, sold and consumed, where as services are sold and then produced and consumed.”
According to WIKIPEDIA,
In economics and marketing, a service is the non-material equivalent of a good. Service provision has been defined as an economic activity that does not result in ownership, and this is what differentiates it from providing physical goods. It is claimed to be a process that creates benefits by facilitating either a change in customers, a change in their physical possessions, or a change in their intangible assets.
As per COMMUNICATION EXPERTS,
A type of task that is performed by a Service Element for a Service Consumer (client). A Service is the actual product that a customer uses, such as a POTS line, cellular line, Internet Protocol connection and so on.
The distinct characteristics of services are mentioned below.
(1) Intangibility: Services are intangible we cannot touch them They are not physical objects. According to Carman and Uhl a consumer feels that he has the right and opportunity to see, touch, hear, smell or taste the goods before they buy them. This is not applicable to services. The buyer does not have any opportunity to touch, smell, taste the services
(2) Perishability. Service has a high degree of perishability. Here the element of time assumes a significant position. If we do not use it today, it is lost forever. If labour stops working, it is a complete waste. It cannot be stored. Utilised or unutilised services are an economic waste. An unoccupied building, an unemployed person, credit unutilised, etc. are economic waste. Services have a high level of perishability.
(3) Inseparability: Services are generally created or supplied simultaneously. They are inseparable. For an e.g., the entertainment industry, health experts and other professionals – they create and offer their service at the same given time. Services and their providers are associated closely and thus, not separable. Donald Cowell states 'Goods are produced, sold and then consumed whereas the services are sold and then produced and consumed'.
(4) Heterogeneity: This character of services makes it difficult to set a standard for any service. The quality of services cannot be standardised. The price paid for a service may either be too high or too low as is seen in the case of the entertainment industry and sports. The same type of services cannot be sold to all the consumers even if they pay the same price. Consumers rate these services in different ways. This is due to the difference in perception of individuals at the level of providers and users. Heterogeneity makes it difficult t
(5) Ownership: In the sale of goods, after the completion of process, the goods are transferred in the name of the buyer and he becomes the owner of the goods. But in the case of services, we do not find this. The users have only an access to services. They cannot own the services. For e.g. a consumer can use personal care services or medical services or can use a hotel room or swimming pool, however the ownership remains with the providers.
(6) Simultaneity: Services cannot move through channels of distribution and cannot be delivered to the potential customers and users. Thus, either the users are brought to the services or providers go to the users. It is right to say that services have limited geographical area. According to Carman and Uhl, "Producers of services generally have a small size area of operations than do the producers of items, largely because the producer must travel to get the services or vice-versa.
When the producers approach the buyer time is taken away from the production of services and the cost of those service is increased On the other hand it costs time and money for the buyers to come to producers directly Here the economics of time and travel provide incentives to locate more service centres closer to prospective customers, resulting in emergence of smaller service centers.
(7) Quality Measurement: A service sector inquires another tool for measurement We can measure it in terms of service level It is very difficult to rate or quantify total purchase. E g we can quantify the food served in a hotel but the way waiter serves the customer or the behavior of the staff cannot be ignored while rating the total process.
(8) Fluctuating Demand: Generally, the services are fluctuating in nature During the peak tourist season there is an abnormal increase in the demand of services Therefore, while identifying the salient features of services one cannot ignore the nature of demand For e g tourists go to hill stations during summer season wherein public transport utilities are used substantially. This indicates that flexibility is the important feature of service
Communication is the process of sending information to oneself or another entity, usually via a language. Specialized fields focus on various aspects of communication, and include Mass Communication, Communication Studies, Organizational Communication, Sociolinguistics, Conversation Analysis, Cognitive Linguistics, Linguistics, Pragmatics, Semiotics, and Discourse Analysis.
The major chunk of communication sector is under mass communication which includes TV, radio, telecom, entertainment sector and so on. In current scenario telecom sector is contributing with IT sector on equal footing rather it can be said that this sector is booming in INDIA
Telecommunication is one of the prime support services needed for rapid growth and modernization of various sectors of the economy, the sector has grown rapidly in recent years, its growth needs to be accelerated further. It is also one of the fastest growing sectors in India and has immense potential for growth. The Telecommunication activity is commercial in nature and people are willing to pay for it. Of all infrastructure sectors, it is perhaps best suited for private sector participation which would help to create competitive environment and improve quality of services to consumers.
Private investment is expected to play a major role supplementing the efforts of the public sector in expanding capacity and also providing competition with the system. In the area of value-added services, the private sector would continue to play a dominant role. The quantum of investment by the private operators would basically be determined by the rate of return on such investments – both basic as well as value-added services.
The Telecom sector has witnessed some fundamental structural and institutional reforms in past decades. Telecom equipment manufacturing was completely deregulated in 1991. Value-added services (including cellular services) were thrown open to private sector participation in 1992. Basic were opened to private participation in 1994 by dividing country into 21 Telecom Circles and allowing one private operator per Circle to compete with DOT. An Independent Telecom Regulatory Authority of India was setup in 1997. A new policy for Internet Service Providers (ISPs) was announced in 1998 allowing independent services providers to enter the sector ending the earlier monopoly of VSNL.
Telecommunication has emerged as an important driving force in a modern economy. Considering it a vital importance, the govt. adopted National Telecom Policy Declaration in 1994. The Telecom network in India is not small in absolute terms. With over 12 million lines, it is the 14th largest in the world. Yet it suffers from a terribly low penetration of 1.3 per 100 populations when the word average is over 10. More than 2.1 million consumers are in queue waiting for Telephone line.
If the Telecom network in India is able to grow at even the current annual growth rate of 20 % for the next five years, it would rank among the six largest networks in the world. This is an absolute terms would mean an addition of 30 million more basic Telephone lines – a number which is expected to be second only in China. India has also expressed its first commitment to make large investments in Value-added services by opening up this sector. All this would place India among the leading countries in terms of equipment purchases.
The Telecommunication sector has undergone a total transformation throughout the world over the last 2 decades. Technological advances have revolutionized the quality and range of services available. Moreover, developments in sphere of information technology, satellite-based Television broadcasting, new forms of communication such as data communication through e-mail and associated services through internet, are all blurring the definition of what constitutes the Telephone services and transforming the way people communicate and conduct business.
Clearly, a country’s ability to benefit from this revolution depends heavily on the modernity of Telecommunications network. Countries that can acquire and assess information on demand and then integrate them usefully into there industrial structure through modern telecommunications network is most likely to experience high rates of growth. Large-scale use of information and telecommunication technologies directly influences productivity, cost effectiveness and competitiveness in industries with high levels of product differentiations and low levels of unit prices.
An advanced telecommunications system is equally Imp for services like banking, trading, retailing, transportation, maintenance and insurance where information and real-time communications are vital to the production process. A reduction in costs of these services will directly enhance international competitiveness within the entire economic system, since lower marketing costs for manufacturing firms exposed to international trade.
Following table gives the brief idea of the teledensity in some developed or developing countries of the world:-
KEY POINTS OF TELECOM SECTOR
Intense competition has resulted in prompt service to the subscribers. However, smaller towns and villages continue to have waiting periods on account of non-availability of adequate infrastructure.
Given the low penetration levels in the country and continuously falling tariffs, demand will continue to remain higher in the foreseeable future across all the segments.
Barriers to entry
High capital investments, older and well-established players who have a nation wide network, license fee, continuously evolving technology and falling tariffs.
Bargaining power of suppliers
Improved competitive scenario and commoditization of telecom services has led to reduced bargaining power for services providers.
Bargaining power of customers
A wide variety of choices available to customers both in fixed as well as mobile telephony has resulted in increased bargaining power for the customers.
The entry of fourth cellular player and commencement of WLL services has resulted in intense competition in the bigger cities. Reducing tariffs will hurt the new entrants, as they will be unable to recover their high capital investments.
MARKET LEADERS AND THEIR SHARE IN TELECOM SECTOR
Mobile telephony services are rapidly expanding and have contributed approximately 941% to new subscriber additions in January 2006. The segment’s subscriber base grew 5.16% mom to 80.61mn. Of the total subscriber’s added, almost 75% subscribers belonged to the GSM segment and the rest were CDMA segment. This strong growth is largely attributed to the lifetime validity cards launched by all major operators.
Further, telecom sector is divided in three segments they are as follow:
1. Global system for mobile communication (GSM)
2. Code division multiple access (CDMA)
3. Fixed wireless terminals (FWT)
DIVISION OF TELECOM LEADERS ACCORDING TO SEGEMNTS
1. Global system for Mobile Communication (GSM)
GSM Market share GSM share of net additions
2. Code Division Multiple Access
Market share of CDMA operators CDMA share of net additions
3. Fixed wire Terminals (FWT)
Market share of private players in FWT Share of net additions of private players
CASE STUDY- BSNL
The BSNL – Bharat Sanchar Nigam Ltd., is the largest telecom service provider of India offering the full range of communication services – basic land line, wireless mobile(CDMA), Leased line circuits, Internet telephony, etc. catering to various segments SOHO ( Small office Home office), Corporate, Individuals, Business groups. In terms of the revenue yield it is found that 15% of the subscriber yields more than 85% of the revenue and this group when distilled further who result in a 5 % of the customer population yielding 50 – 60% of the billing. In a competitive environment it is this group of customers who are most vulnerable to be lured away by the private operators (competitors). The following information has made an attempts to define the various relationship markets present in the segment.
DEFINING THE MARKETING MIX - 7 Ps
The product is provision of communication service( Basic Telephony, mobile ( CDMA, GSM) technologies, Dedicated leased circuits, Voice over IP, Internet services)
The price is based on the usage charges as per tariff apart from the installation cost. Discounts are offered to heavy callers.
The place of delivery is the customer premises/location.
The promotion very limited till recently. However now logos, brands names for different services, slogans (Connecting India) etc have been coined. Very recently advertisement in the print media as well as television commercials has been released. (www.bsnl.co.in)
The people have a key role to play since it is a service sector. However this is the weakest link in the marketing mix since the monopoly attitudes have hardly changed at the ground level.
The process is another one of the neglected Ps. A lot of corrective processes have being provided for after the complaints by line up of escalations, meeting the senior officials etc. Yet the preventive/ proactive processes are not sufficient/ (work –in – progress).
The physical evidence (being a service sector) depends on the maintenance of front end staff dealing with customer care, the office premises and facilities available there, toll free numbers, call centers.
The main problem is faced by the company is that it cannot handle its existing customers in an right manner like partly customers are satisfied with the service and partly are still need to be satisfy, this can be done only through taking customer care as main area while segmentation.
CUSTOMER CARE & SEGMENTATION:
Apart from the marketing mix described above the steps taken towards customer care can be taken through dividing them in different groups
These may be grouped into preventive processes, empowering the grass root level, work in progress which are very critical in customer service/ improving service availability level, Bill payments made easy and some measures quite frivolous as application form being made free.( A typical example of the monopoly hangover).
The Company has identified the high callers or those who make calls worth more than Rs.5, 000/- per month as the high calling segment. This kind of segmentation purely based on the revenue yield alone results in a heterogeneous group of high calling individuals, companies, corporate with inter city presence. Neither has this group been refined further for preferential differentiation nor are any of the measures specified in the customer care specifically targeted towards this groups. Of course the system corrections undertaken would benefit the high callers as well. Hence apart from providing certain billing discounts or special meeting time the issues cannot be very clearly addressed.
Classification of customers (Jones and Sasser Model (1995) )
If one were to use this model for classifying this segment further it would be seen that about 10% would be in the Hostage category. They are vocal, corner the available resources for servicing and are complaining in nature. And the experience of the BSNL managers is that this category normally contributes less to the revenue pool and hence would not be attractive to the competition. A majority about 60%of the segment would be in the Mercenary category, ready to make a shift, about 20% would be in the defector and terrorist segment (this would include the media and think tank users of the communications) would be make use of every opportunity to spread the negative image and a loyal group of about 10% who are satisfied and stay with the company through the problems.
BSNL should reward the loyal group by giving strength to their voice, try to neutralize the impact of the defector terrorist group using pressure strategy and try to move the Mercenary to the Loyal group. It should also know how to shake off the hostage group without explicitly stating so.
RELATIONSHIP MARKETS APPLIED TO THE CASE (Christopher models)
RECOMMENDATIONS FOR CHANGE
1) The High calling segment is distilled further on the basis of revenue yield and country wide presence.
They should be given classified as Platinum, Gold, Silver, classic groups based on their total countrywide billing and these member subscribers should be eligible for country wide facilities. The senior officers, frontline and other staff should be educated about the value of these groups and they should be provided with premium service.
2) The requirements should be studied ( guaranteed uptime of service, fault attendance within the stipulated time, 24x 7 service, integrated billing, single point contact or Key Accounts Manager, etc) and addressed.
3) Being a public company major problem can be of over staff which need to be cut off but instead of cutting the staff company can use its some employees in marketing their product as they working in the company since many years they have more knowledge about the company and the services which company offers.
4) The provision of total solutions still remain a myth as the customer has to still run between various wings ( Circuits, Basic phone, Mobile, Internet, Long distance) for their communication needs. Nodal points for interacting should be provided. This would actually help the company sell more as a corporate group having Leased Circuits will also need land lines for office/ residences, mobile communication needs for their officers and sales staff etc.
INTERVIEW WITH A.K. SINHA, CHAIRMAN AND MANAGING DIRECTOR.
A.K. SINHA, CMD of BSNL.
A.K. Sinha, who served as Senior Deputy Director-General (Switching) in Bharat Sanchar Nigam Limited's (BSNL) corporate office before assuming charge as its Chairman and Managing Director (CMD) in September 2004, has brought his knowledge of various telecom switching systems and other important aspects of telecommunications to India's largest telecom service provider.
Sinha joined the Indian Telecommunication Service in 1969 and has held the posts of General Manager (Development) in Mahanagar Telephone Nigam Limited's (MTNL) corporate office and in MTNL, Delhi, and Chief General Manager of Andaman and Nicobar Islands and Jharkhand Telecom Circles.
He has experience in the installation and commissioning of various switching systems in the networks of Calcutta and Delhi Telephones. As Divisional Engineer (Installation), he was instrumental in commissioning the first C-400 type Japanese telephone exchange in Calcutta Telephones and thereafter in MTNL, Delhi. He worked for three years in the Telecom Department of Nigeria.
How do you see BSNL's future as a leader in the telecommunications sector? In terms of growth, what is the key factor behind the entity's fiscal result for the previous year?
BSNL holds the top position in the telecom sector and will continue to do so. We have the unmatched footprints of our service spread across the country. Being one of the largest public sector enterprises, BSNL has always delivered targets taking into account the social and regional goals. Our last fiscal results give a clear picture of our continuous growth despite fierce competition. We are proud of our impressive growth of over 50 per cent. I believe over a period of time we have improved the delivery of our services, which is the most functional factor in awarding us significant growth.
Can you detail the steps being planned by BSNL to expand its service from basic to mobile telephony to broadband?
Despite the impressive strides [made in the sector] over the past few years, India has low teledensity compared to many other countries. Hence, we see a large potential in various States. The government has decided to double the teledensity from 10 per 100 people to 20 in the next three years. Public sector telecom units have been given the mandate to double their own networks. So, we are in the process of doubling the capacity and penetrating areas that have not yet been covered.
From covering all district headquarters, we plan to spread our footprints to all block headquarters. A 60 million GSM [Global System for Mobile Communications] equipment acquisition tender is already on as part of mobile telephony expansion plans. BSNL is also expanding its base in broadband services and hopes to add a million subscribers every year, changing the country's Internet usage. Also, BSNL's network is expected to reach all villages by 2007.
What are BSNL's landmark achievements in the current year?
It has broken all its past records by registering an impressive growth of 55.6 per cent in Direct Exchange Line. It registered a 9 per cent rise in its operative income. Apart from this, BSNL has added a large number of consumers, much more than its target, to its cellular and basic subscriber base and is doing remarkably well in broadband and village telephony.
In the growing competition among service providers, how does BSNL plan to stay in the top position?
BSNL is the leader in all service areas that it operates. Whether it is basic telephony or cellular or CDMA-based telephony or Internet. As I said earlier, we have an expansion plan for 60 million lines in mobile telephony alone.
In another three years, when the country's teledensity reaches 20 per 100 people, BSNL will have a 50 per cent market share. The rest of the players together will share the remaining market.
With our reach and footprint and expansion plans, we will still hold the leadership role in all areas of telecom service despite fierce competition in the market.
There appears to be a fair reduction in last year's waitlist. What steps are planned to clear the wait list?
In fiscal 2005-06, BSNL reduced the waitlist from 16.20 lakhs to 12.69 lakhs in both the landline and mobile sectors. As per our expansion plan, we are qualitatively improving our network with the introduction of state-of-the-art technology to meet the requirements. The 60-million expansion plan is aimed at clearing the waiting list as well as adding new areas and population to our network.
What is your expansion plan for the current fiscal?
Apart from the ongoing one, we plan to add 20 million GSM lines this year. Once the roll-out of the 60-million GSM tender happens, we will be able to launch 3G mobile phones. We hope to add a million broadband subscribers to our network. We are also taking steps to arrest the surrender of phones in our network.
Although there is a net increase in subscribers, we are launching a series of measures to make basic telephony more attractive. Above all, we plan to improve the quality of our services and our profits.
This year we expect to emerge as the largest mobile telephony operator in the country even in numbers, although we are not present in the two largest areas of operations - Delhi and Mumbai
Frontline India Magazine